Government Fund Weekly News Roundup: Indian Investments

February 12, 2016 by SWC Editors

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In the news this week: Temasek Holdings invests in an Indian biotech firm that is developing treatments for the Zika virus. Government funds compete for Indian hard assets. And the Canada Pension Plan Investment Board and Denmark’s ATP Group announce their latest results. 

Temasek to Finance Zika Vaccine?

As the Zika virus sweeps across South America, international drugs companies are frantically working on a vaccine. One firm has already had some success in developing a treatment for the mosquito-borne virus — not one of the big multinationals, but a privately-owned Indian biopharmaceutical firm named Bharat BioTech, which has filed for global patents for two Zika vaccines.

The news of Bharat’s breakthrough has generated much excitement amongst the international media, but Bharat has warned it may take ten years to bring the drug to market. The company will need patient long-term capital to support its work over the next decade — and Singapore’s $194 billion state investor Temasek Holdings is among those willing to provide it.

Temasek, which has long been a prominent investor in emerging drugs companies, is reportedly competing with private-equity firms to acquire a $200 million stake in Bharat after three of its existing investors — Indian venture capital firms ICICI Ventures and Subhkam Ventures, and the International Finance Corp., a unit of the World Bank — decided to sell.

Indian Hard Assets

Temasek is also eyeing a real estate investment in India. Gurgaon-based real estate developer DLF is selling a 40 percent stake in DLF Cyber City Developers, its commercial leasing unit, and Temasek is reportedly in discussions to buy the shares.

But Temasek is not alone: It will face competition from several other government investors, including its national peer, GIC, the Abu Dhabi Investment Authority, the Canada Pension Plan Investment Board and the Qatar Investment Authority. These funds are reportedly willing to pay as much as 135 billion rupees ($2 billion) for the stake.

ADIA, meanwhile, is in talks over an investment in the Indian road network. According to reports in the local press, ADIA is in advanced negotiations with the National Highways Authority of India, a government body, to acquire a portfolio of 50 toll-operated highways across the country for approximately INR 350 billion.

Other funds are looking at more lucrative distressed assets in the Indian infrastructure sector. According to reports in the local press, Caisse de dépôt et placement du Québec, the Kuwait Investment Authority and the State General Reserve Fund of the Sultanate of Oman have teamed up with two Mumbai-based companies — private equity firm ICICI Venture and utility operator Tata Power — to form a joint venture that will buy distressed power-generation assets across India. The three government investors will reportedly provide a total of $650 million to the venture, with ICICI and Tata contributing an additional $200 million.

Sovereign wealth funds’ evident confidence in the Indian economy appears well-founded. According to figures disclosed by the Indian government on Monday, India’s GDP growth topped 7.2 percent in 2015 — surpassing even China’s 6.9 percent growth rate.

ATP and CPPIB Announce Strong Results

Two government funds announced impressive performance figures this week. CPPIB disclosed a return on investment of 4.6 percent during the three months to December 31, 2015, bringing the fund’s overall assets to C$282.6 billion ($204 billion). In a statement, CPPIB's CEO Mark Wiseman attributed the results to the strong performance of the fund's global equities portfolio.

Denmark’s ATP Group announced even better results. The fund returned a stellar 17.2 percent in the calendar year 2015. Overall, ATP grew by 16.5 billion krone ($2.4 billion), largely thanks to solid performance of the fund's equity portfolio.

ATP also revealed that it has adopted a new approach to portfolio construction. Since 2006, the fund has allocated risk using asset classes such as equities, credit and commodities, but from now on ATP will use what it calls risk factors, such as interest rates and inflation, to construct its portfolio, following a model pioneered by CPPIB and other Canadian pension funds.

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